The weekly real rate chart is on the left, and the weekly USDOLLAR chart is on the right. The dollar has risen as the real rate has increased. However, both charts show excess, with their respective RSIs above 80 (blue rectangles).
Prices don't move in a straight line, and the overbought condition may be precursors to corrective legs in the market. However, given the tight monetary conditions, dips will look compelling if the RSIs normalise.
The bond market has capitulated as yields appreciated. As such, there may be interest in the bond market. If so, this may be the catalyst for the overbought RSIs normalisation.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.